Income Tax Bill 2025: No Change in Tax Rates

The Income Tax Department has issued a strong clarification regarding the proposed Income Tax Bill 2025, stating unequivocally that there will be no change in tax rates, including Long-Term Capital Gains (LTCG) tax. The clarification comes amidst widespread speculation and reports in the media suggesting otherwise.

Long-Term Capital Gains (LTCG): Profit earned from the sale of assets such as stocks, mutual funds, or property held for a period exceeding a specified duration (usually more than one year in the case of listed equity shares). LTCG is subject to different tax rates compared to short-term gains.

The department clarified via an official post on the social media platform X (formerly Twitter):

“There are news articles circulating on various media platforms that the new Income Tax Bill, 2025 proposes to change tax rates on LTCG for certain categories of taxpayers. It is clarified that the Income Tax Bill, 2025 aims at language simplification and removal of redundant/obsolete provisions. It does not seek to change any rates of taxes. Any ambiguity in this respect shall be duly addressed during the passing of the Bill.”

This clarification came after several reports claimed that the bill would alter LTCG tax rates or remove existing tax exemptions on equity investments. The department emphasized that such claims are misleading and reiterated that the bill is intended to modernize and streamline the income tax law without altering the existing tax structure.

Purpose and Objectives of the Income Tax Bill 2025

The Income Tax Bill 2025 was introduced in the Lok Sabha during the Budget Session in February 2025. It aims to replace the existing Income Tax Act of 1961, a law over 60 years old, with a fresh and technology-friendly framework. Following its introduction, the bill was referred to a select committee of the Lok Sabha, which submitted its report on July 21, 2025.

Key goals of the bill include:

• Simplifying legal language to make tax laws more understandable.

• Removing redundant or outdated provisions that have accumulated through decades of amendments.

• Improving the ease of doing business in India.

• Reducing litigation burden on individual taxpayers.

• Encouraging investment and job creation under the Make in India initiative.

Make in India: A flagship initiative launched by the Government of India to encourage companies to manufacture their products in India and incentivize dedicated investment into manufacturing.

Key Features and Scope of the Income Tax Bill 2025

The proposed Income Tax Bill contains 23 chapters and 536 provisions, a significant simplification compared to the existing Income Tax Act, 1961, which has 47 chapters and 819 provisions. This structural reduction reflects a deliberate attempt to make the law more accessible and less cumbersome for taxpayers.

According to Milind Deora, a member of the parliamentary select committee:

“This bill has seen several amendments. The government's objective, which is the right idea, is that this bill—which is over 60 years old and has so many amendments—should be done away with and replaced by a new, fresh bill. That step on its own and its intent will reduce harassment, improve ease of doing business, and encourage investments to Make in India, invest in India, and create jobs.”

Deora further stated that the rewritten bill would not only benefit large foreign corporations but also Micro, Small and Medium Enterprises (MSMEs) and individual taxpayers by simplifying procedures and reducing compliance complexities.

MSMEs (Micro, Small and Medium Enterprises): These are businesses whose investment and turnover fall within specified thresholds, playing a crucial role in the Indian economy through employment generation and contribution to GDP.

The Income Tax Bill 2025 is a landmark legislative effort aiming to replace, modernize, and simplify India's decades-old tax law. Despite rumors, the Income Tax Department has confirmed that no changes in tax rates—including those on LTCG or equity-related exemptions—are proposed under this bill. The focus remains solely on structural clarity, modernization, and efficiency, laying a cleaner legal foundation for India’s tax system in the years to come.

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